The past year has been challenging for New Zealand small businesses, with many grappling with rising costs, decreased customer demand, and cash flow pressures. At last, the tide is beginning to turn: recent research reveals that 56% of SMEs expect market conditions to improve in 2025, with 42% planning to invest in growth initiatives such as marketing and technology. As the economy begins to show signs of recovery, this is the perfect time to position your business for success. To help you prepare, we’ve compiled five actionable strategies to thrive in 2025.

1. Zero in on the numbers that matter

Numbers are the language of business, yet many SMEs overlook tracking key financial metrics. Even if you’re not naturally drawn to numbers, focusing on the basics can make a significant difference. Start by setting your sights on four essential metrics:

• Sales growth: How much has your revenue increased compared to last month or last year?
• Gross margin: What does it cost to deliver your product or service versus what you’re charging?
• Net profit margin: How much of your revenue is actual profit after all expenses?
• Tax obligations: Keep track of what you owe to avoid surprises.

Regularly reviewing these metrics enables you to identify trends and make informed, smarter decisions.

2. Take the stress out of cash flow

Cash flow is the lifeblood of any small business, but many SMEs in New Zealand are operating with limited reserves. Prospa’s SME Sentiment Tracker from November 2024 reveals that half of New Zealand SMEs have cash reserves covering only three months or less of expenses. It’s a clear reminder of how important it is to manage cash flow proactively. Here’s how to make cash flow simple:

• Invoice regularly and promptly: Don’t wait to send out invoices. The sooner you bill, the sooner you’ll get paid.
• Chase debtors early: Follow up on overdue invoices as soon as the due date passes. Letting debts linger only adds unnecessary stress.
• Plan for tax and payroll: Remember, some of your cash belongs to the IR or your employees. Set funds aside for these obligations as soon as the money comes in.

By staying on top of your cash flow, you’ll reduce stress and be in a better position to reinvest in areas that drive growth, like new equipment, marketing, or hiring.

3. Strengthen your capital base

Many small businesses underestimate how much capital they need to operate smoothly and grow, often leaving themselves exposed to financial stress when unexpected expenses arise. With three in ten SMEs planning to seek external funding in the next year, it’s clear that securing capital is a priority for many businesses looking to grow as the economy rebounds. Here’s how to strengthen your capital position in 2025:

• Plan for unexpected expenses: Build a financial buffer with three to six months of operating expenses to cover unforeseen costs without disrupting your business.
• Set benchmarks for capital needs: Work with your accountant to identify how much capital your business requires based on its size, goals, and industry. This clarity ensures you’re not caught off guard by cash flow demands.
• Explore funding options: To ensure your business has access to the funds it needs when it matters most, consider options like retained earnings (keeping profits in the business), equity (bringing in investors), or financing solutions (such as loans or lines of credit).

4. Take control of your operating costs

When sales are growing, it’s easy to overlook rising costs. Many businesses find that while their revenue doubles, their costs triple, leaving them with reduced profits. Here’s how to stay in control of your costs:

• Review expenses regularly by going through your operational costs each quarter to identify unnecessary spending or areas where savings can be made.
• Negotiate with suppliers to secure better terms or explore alternative options for key goods and services.
• Streamline processes by investing in tools or systems that improve efficiency and reduce manual work, saving both time and money.
• Switch to yearly subscriptions if you’re using software or services billed monthly. Many providers offer discounts for annual payments, reducing your overall costs.

Keeping costs in check allows your business to turn higher revenue into greater profits.

5. Set long-term goals and align short-term actions

To achieve sustainable growth, it’s essential to think beyond the immediate future. A clear five-year vision can guide your annual goals and the actions you take today. Here’s how to set a clear direction for your business:

• Define your five-year vision: Consider what success looks like for your business — whether it’s expanding to new locations, increasing revenue, or creating a lifestyle business that gives you more freedom.
• Break it down into milestones: Translate your long-term vision into smaller, actionable goals for the year ahead, such as hitting specific sales targets, hiring key staff, or launching a new product.
• Focus on resources: Identify what you’ll need to achieve your goals, including funding, staff, and tools.

Aligning your short-term efforts with long-term objectives ensures your daily actions build toward your ultimate vision. Research Findings: New Zealand SME Sentiment Tracker (Nov 24) – Clarity Insight.